PLCs and Stock Market Flotation

• what is stock market flotation?

  making a company’s shares available for public trading. this is called an IPO if the shares are being made available for the first time but it can also be selling more shares to public later known as secondary offerings
• what is an initial public offering (IPO)?

  the process a business goes through when it first makes shares avaliable to the public on a stock exchange to become a public limited company
• what is a public limited company (PLC)?

  an incorporated business that is allowed to sell shares to the public through a stock exchange/ where 2nd hand shares can be traded publicly
• characteristics of a PLC?

  • owned by shareholders
  • run by a board of directors
  • shareholders get paid dividends
• advantages of a PLC

  • easy to raise large amounts of finance
  • lots of financial incentives avaliable to use
  • easy and sometimes cheaper to borrow from banks
  • easier for shareholders to sell their shares
  • can help with future takeovers
  • limited liability
  • no interest on shares
  • increase reputation
• disadvantages of PLC?

  • pressure for dividends > harder to retain profit
  • risk of only doing short term non risky projects
  • loss of control
  • risk of hostile takeovers
  • market scrutiny
  • management time / opportunity costs
  • accounts viewed publicly